George Finn, Rose Law Group transactional and estate planning attorney, explains why new IRS portability rule is ‘huge for estates’

By Alessandra Malito | Market Watch

Ultrawealthy families with millions of dollars to leave behind as inheritances will save a lot on taxes thanks to the Internal Revenue Service’s latest portability rule.

Individuals can give up to $12.06 million tax-free to their children and other nonspousal beneficiaries during their lifetime or upon death, under limits for 2022. Anything above that is subject to a 40% tax (either known as a gift tax or estate tax, depending on when the money was handed over).

Spouses may transfer to their surviving spouse what’s left of the tax-free limit that they didn’t use, and they now have five years to do so, the IRS said in a ruling this month.

Previously, married couples had two years to file for this portability extension – that is, the allowance to transfer over any unused amount of the $12 million (known as the exemption) to the surviving spouse. To do so, individuals must file an estate tax return, which is typically due nine months after the decedent’s death.

Not everyone needs to file an estate tax return, and the surviving spouse of someone with less than the exemption amount of $12 million may not think it necessary since there would be no estate taxes due. But doing so gives the surviving spouse “portability” of the exemption should he or she ever need it.



“This is huge for estates where one spouse has passed more than 2 years ago but less than 5 years and the surviving spouse failed to elect the portability of the deceased spouse’s estate tax exemption.  This effectively allows surviving spouses who missed their opportunity to port their deceased spouse’s estate tax exemption an additional 3 years.  Millions of otherwise taxable dollars can now be shielded for surviving spouses by making such election.”

George Finn, Rose Law Group Estate Planning Attorney